Effects of BITs on FDI: The Role of Publication Bias

The question, whether International Investment Agreements (IIAs) actually increase FDI inflows has been at the center of the debate about the political, legal, and economic desirability of IIAs. As empirical evidence is mixed so far, we use meta-analysis in order to study the role of publication bias as well as the existence of a genuine effect. Our meta-analysis comprises 40 studies and 721 effect sizes, defined as semi-elasticities, carefully selected from an initial sample of 70 empirical studies. Disregarding a possible publication bias, we estimate the effect of Bilateral Investment Treaties on FDI between zero and an increase of 23.3% of FDI. However, our findings point to the existence of a positive publication bias in subgroups of the studies, suggesting genuine effects below 1%. This has important policy implications.